technically if your rates don't keep up with inflation... there is a paper by Espen Gaarder Haug about negative interest rates in the Black Scholes Equations- nothing important, but its definitely mathematically possible.
The answer is no. Nominal interest rates do not go negative. Only the real rate can go negative (nominal - rate of inflation = real rate). Think about it, would you pay someone to borrow money from you? If money became such a hindrance (liability) to those who held it that they needed to pay people to borrow it, then it would have NO value.
Generally it's not possible because people will never lend money at a negative rate, it doesn't make sense when you can rather just leave it in cash. But, I suppose it would be possible for the fed to force banks to accept negative interest rates on their reserves which would in turn force banks to place negative interest rates on all customer deposits, but this would cause a large bank run where people would rather hold physical currency.
Nominal lending rates do not go negative as explained by plugger above. Deposit rates can go negative as they did in Switzerland in the 70's.
au contraire, as any student of history can tell you: http://query.nytimes.com/gst/fullpage.html?res=9C01E7D9153EF934A35752C1A96E958260 Japanese interest rates were already the lowest on record, so it had seemed impossible that they could go any lower. But they have: some interest rates are now dancing into negative territory. This week, investors have bought short-term Japanese Government bills that have negative yields. In other words, they are paying more money than they can expect to earn when the bills mature in six months, in effect paying simply for the privilege of holding bonds. Likewise, a few foreign banks are paying interest, instead of earning interest, for clients to borrow their money. In some countries, bank depositors have occasionally earned negative real interest rates, meaning that their yields were less than the inflation rate. But this is much more rare: the nominal interest rate is negative. ''We've basically never seen this before,'' said William D. Campbell, a strategist with J. P. Morgan in Tokyo. The slide below zero shows how some investors have become so downbeat about the Japanese economy that they are willing to invest only in Government bonds, the safest bets in the country. It also means that there are so many yen around that some banks, mostly foreign banks, are willing to pay someone to take them off their hands for a time. Why would anyone pay someone else to take his money? Why not just keep it? Partly for convenience. A bank could keep the yen but that could lead to extra expenses. So long as the interest rate is only slightly negative, it may prefer to buy bills even if there is a slight cost. A bank could keep its yen at the Bank of Japan, but with so much cash, there are transportation costs. There is also a larger issue. ''It's symptomatic of radical pessimism of the economy,'' said Jeffrey D. Young, an economist with Salomon Smith Barney in Tokyo. The rush to Treasury bills is virtually an escape from Japanese banks, analysts say. With the economy in recession and piles of bad loans eroding the capital bases of the banks, some of Japan's weakest financial institutions are caught in the struggle for their corporate lives. Such is the distrust of Japanese banks that investors may prefer to pay for the right to put their money in Government Treasury bills for a few months instead. At least, the feeling seems to be, then it will be safe. Indeed, the same flight to quality drove down yields on United States Treasury bills to virtually zero in the Depression. Still, while Treasury yields typically serve as benchmarks for lending rates, the negative yields in Japan have not yet led consumer and corporate rates below zero. Also this week, a few foreign banks, like Barclays Capital, J. P. Morgan and Citibank have announced negative interest rates on lending yen to other banks. Barclays Capital advised other banks that if they wanted to borrow yen, they would be charged the equivalent of an annual interest rate of minus 0.03 percent. That means that Barclays would pay the borrowers to borrow, and so for every million yen borrowed, the client would over a year's time receive 300 yen. A spokeswoman at Barclays Capital, the investment arm of Barclays Bank, said, ''We have traded at that rate quite frequently.'' She added that transactions were also recorded at negative 0.08 percent as well. J. P. Morgan also offered rates as low as negative 0.0625 percent, but the bank declined to say how many transactions were concluded at such negative interest rates. Richard A. Mahony, spokesman for J. P. Morgan in London, said that in the current market environment, Morgan could still finance itself with yen so cheaply that it could ''profit by lending at zero or even slightly negative rates.'' Indeed, the reason that foreign banks have such cheap access to yen currency is because of the troubles in the Japanese economy. Japanese banks have an acute demand for dollars to help finance their overseas operations, but American banks are hesitant to lend dollars to them because of heightening concern over the Japanese financial system. The ''Japan premium,'' the higher costs that Japanese banks hav
Surfer, it's possible as you've shown above, but it's fleeting at best. The panic to escape bank deposits led to the above instance. However I think you would be hard pressed to find a period of history where nominal interest rates went negative and stayed there for an extended period of time. But if you can point out some research or anything that shows otherwise, I'm always open to new learning. I have been wrong before and certainly will be again.
thanks. i am far from an expert in this specific topic, just aware of what happened in japan. anymore info would be appriecated here also. surf surf